Waste Management Case

Fraud Risk Factors

Pressure to maintain reputation and standing

Industry changes and intensified competition

Earnings targets set by senior management

Senior management bonuses based on meeting performance targets

High level of subjectivity in many financial statement accounts

Lack of willingness to record misstatements identified by auditor

Risk for auditor not reporting

Crown jewel client

very close relationship

performing non-audit services and making more off of these services

CFOs were formerly at Anderson (meaning they knew the audit procedures and how to hide things from the auditors)

Accounting Estimates PPE

First thing to do with all estimates, ask management how they determined the amount

Useful life: comparing industry norms, consult with experts (dealers and manufacturers), see if company has used and disposed of assets before

Salvage value: look at historical data, dealers, manufacturers

Impairement

Other Accounting Estimates

Short-term investments: classifications, valuation

Allowance for uncollectible receivables

Long-term contracts

Intangible assets: amortization period, impairment

Waste Management errors

cookie jar reserves from acquisitions

capitalization expenses

Failed to provide sufficient reserves/liabilities for certain items

Inappropriate netting

Manipulated geography